With voluntary exchange, a buyer and seller agree to do business together
a. only for the benefit of the seller
b. only for the benefit of the buyer
c. for the mutual benefit of both
d. for the benefit of neither
Ans: d. for the benefit of neither
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In a constant-cost industry, input prices remain constant as:
a. the supply of inputs fluctuates. b. firms encounter diseconomies of scale. c. workers become more experienced. d. firms enter and exit the industry.
Refer to the graph below. Assume that the economy is initially in equilibrium at the intersection of AD1 and AS1. Suppose that there is economic growth which shifts AS1 to AS2. If the application of a monetary rule is designed to shift AD1 to AD3, but because of pessimistic business expectations AD1 only shifts to AD2, then mainstream economists would suggest that the actions to be taken to avoid deflation would be to implement a(n):
A. Expansionary fiscal policy and a tight money policy
B. Contractionary fiscal policy and a tight money policy
C. Expansionary fiscal policy and an easy money policy
D. Contractionary fiscal policy and an easy money policy